Buffett bets on truck stops, to buy majority of Pilot Flying J
Warren Buffett’s Berkshire Hathaway Inc. has bought a major stake in Pilot Flying J, the largest US truck-stop operator, and said it would become the majority owner in six years, deepening its commitment to the American economy.
Pilot Flying J has more than 750 locations in 44 US states and Canada selling gas, diesel fuel and convenience goods and offering trucks more than 70,000 parking spaces and 5,000 diesel lanes.
While terms for Tuesday’s transaction were not disclosed, Pilot Flying J is the 15th-largest private company in the United States, with annual sales of $19.6 billion, Forbes magazine said. The family-run company employs more than 27,000 people.
Berkshire bought 38.6% of Pilot Flying J from several investors and plans to boost ownership to 80% in 2023.
The controlling Haslam family retained a 50.1% stake and will own the remaining 20% once Buffett takes over.
Pilot Flying J has faced scrutiny in recent years over whether employees withheld diesel-fuel rebates from customers. In 2014, it paid a $92 million fine to settle a US criminal probe. Several executives were later criminally charged.
As he normally does when buying family-run companies, Buffett will leave Pilot Flying J’s management in place.
The Knoxville, Tennessee-based company is led by billionaire Jimmy Haslam, who also owns the Cleveland Browns football team and whose brother Bill is Tennessee’s governor.
Jim Haslam, Jimmy’s father, founded what became Pilot Flying J in 1958 with a single gas station. The company’s formal name is Pilot Travel Centers LLC.
“Jimmy Haslam and his team have created an industry leader and a key enabler of the nation’s economy,” Buffett said in a statement. “The company has a smart growth strategy in place, and we look forward to a partnership that supports the trucking industry for years to come.”
Shares of TRAVELCENTERS of America, a Pilot Flying J rival, rose as much as 15.7%% on Tuesday.
Berkshire’s investment comprises nearly 27% from the Haslams, 6% from the Maggelet family’s FJ Management Inc., 5% from Byron Trott’s BDT Capital Partners LLC and small stakes from other investors.
FJ still has 11.3% ownership. Jimmy Haslam told CNBC the transaction with Buffett came together after Trott, a mutual friend, introduced them in May.
The purchase may help Buffett, 87, overcome his recent struggles to deploy Berkshire’s $100b. cash hoard.
Buffett has not had a major acquisition since spending $32.1b. in January 2016 for aircraft and industrial-parts maker Precision Castparts.
He tried this year to pay $9b. for the Oncor electric utility in Texas and provide $15b. of financing for a Kraft Heinz Co. takeover of Unilever Plc, but both transactions fell apart.
Adding Pilot Flying J also boosts his bet on US economic growth.
Berkshire also owns the BNSF railroad, industrial-sector companies such as Precision Castparts, Marmon Holdings and IMC International Metalworking and in 2015 paid $4.1b. for Van Tuyl Group, a big auto-dealership business.
Marmon and IMC were also family-controlled businesses that Berkshire bought in stages.
“He truly wants us to run the company, wants us to maintain the culture,” Haslam said about Buffett. “It’s just a marriage that we thought made a lot of sense.”